People shop for an air conditioner inside an electronics store in Mumbai
People shop for an air conditioner inside an electronics store in Mumbai, India, May 19, 2022. Picture taken May 19, 2022.

India's wholesale price inflation slowed in August helped by a fall in commodity prices, but double-digit price gains for the 17th month raise the chance for more rate hikes this month.

The wholesale price index climbed 12.41% in August from a year earlier, lower than a forecast of 13% in a Reuters poll, and compared with 13.93% the previous month.

While falls in global crude oil and commodity prices have eased pressure on companies facing a rise in input costs, prices rose for a broad range of food items - cereals and vegetables among them, data showed.

A near 7% depreciation of the rupee against the dollar this year has made imported inputs costlier for companies who have tried to pass higher prices on to consumers as the economic recovery gains momentum.

Wholesale food prices, contributing about a quarter of the WPI index, climbed 9.93% in August from 9.41% in July. Fruit prices jumped 31.75% and vegetable prices by 22.29% over the year, data showed.

WPI's major components WPI's major components

The Reserve Bank of India's Monetary Policy Committee has lifted the repo rate by 140 basis points since May, including by 50 bps last month. The government has also imposed export curbs on rice, wheat and sugar, and states stepped up other relief measures to manage inflation.

The MPC holds its next monetary policy review on Sept. 30 and is widely expected to raise the repo rate by 35-50 basis points due to stubbornly high inflation.

Retail inflation in August accelerated to 7% from a year earlier and will likely remain above the central bank's tolerance band through this calendar year.

India's wholesale inflation

The pace of interest rate increases should be calibrated from here on to ensure economic recovery does not stall as the central bank tries to bring inflation within its tolerance band, Ashima Goyal, MPC member, told Reuters on Tuesday.

India's economy grew 13.5% in the April-June quarter from a year earlier, slower than the RBI's earlier estimate of 16.2%. The economy is expected to grow close to 7% in the current financial year ending in March 2023.

A vendor climbs to his stall as another waits for customers at a wholesale vegetable market in Mumbai
A vendor climbs to his stall as another waits for customers at a wholesale vegetable market in Mumbai, India, March 14, 2018.